City Council must rein in pension system

City Attorney Jan Goldsmith thinks the San Diego City Employees Retirement System needs to be reined in, and history says he’s right. The leaders of the city’s pension system have a record of doing dubious, even outrageous things, and then staunchly defending their actions.

The worst example remains the 2003 decision by the SDCERS board to give all city employees 60 days to buy up to five years of service credit to boost their annual pensions at a rate that was sharply below the anticipated full cost of providing the more generous pension – even though the law regulating the service-credit program required that it be cost-neutral. This giveaway led more than 2,000 city employees to buy more than 6,500 years of service credits during the 60-day window, more than all the combined service credits bought by employees for the previous six years combined. SDCERS’ actuary later calculated the giveaway added $146 million to the pension system’s unfunded liability.

Goldsmith continued the challenge to this gift of public funds that was launched by Mike Aguirre, his predecessor, and was backed last year by the Fourth District Court of Appeal. It said SDCERS could not pass the cost of the giveaway on to the city because the pension agency did not have the “authority to evade the law” and the requirement that the sale of years of service be cost-neutral.

But, unfortunately, a troubling technicality has given SDCERS a court victory in another battle with the city attorney. The complex case involves an $86,000 annual pension provided to former labor leader Judie Italiano that was based on a salary history that included 22 years as head of the Municipal Employees Association. The IRS in 2007 said the pension was not legal because her union service should not have been factored into her city pension since she was not a city employee. Italiano sued, but a judge ruled that the city only owed her a $5,700 annual pension based on her nine years as a city typist.

However, the city pension board had already awarded Italiano a $700,000 settlement. Because of a 2008 City Council agreement allowing SDCERS to settle litigation without city approval, Superior Court Judge Joel Pressman approved the settlement – while tartly noting that it was “crafted to give judicial cover to an agreement based on illegal acts.”

Goldsmith wants the City Council to prevent similar actions by SDCERS in the future by requiring council approval for settlements going forward. Predictably, the pension board is balking, asserting it “is an independent entity with plenary and exclusive authority over administration of the retirement system” that “cannot delegate veto power to either the city or the city attorney in this circumstance.”

Given this board’s dismaying history, however, its “exclusive authority” badly needs checks and balances. The City Council on Monday should support Goldsmith’s attempt to create just such a check.

Editor's note: This editorial was clarified on Friday, July 22, to more fully explain the background of one of the legal battles it describes.